5 Questions With . . . Dick Miller on Keeping Track of the Money
This issue we ask “5 Questions” of Dick Miller, the Woodhouse/Sysco Professor of Economics, Emeritus, who retired from active teaching in 2006. Next fall, he’ll be back in the classroom with a liberal arts spin on the uses and abuses of financial accounting.
Q: In the fall, you’ll emerge from retirement to teach ECON 127, “Introduction to Financial Accounting,” a type of course that’s rarely been offered at Wesleyan. Why this course, why now and why you?
A: The Economics Department has recognized that we need an accounting course in our curricular offerings, but we have difficulty in getting a visitor to teach one. Our students are at a disadvantage in job interviews and in the first weeks on the job if they do not have some basics. Some of our seniors cannot distinguish a balance sheet from an income statement, and that is a long way from discounted cash flow analysis or cost of capital estimation. I taught a half course in accounting some years ago, and several months ago the department chairman, Gil Skillman, asked me if I would be interested in teaching such a course, and I think that this is an opportunity for me to contribute further to the Wesleyan educational enterprise. The Career Advisory Council, a group of 24 alumni mostly in business and put together by Mike Sciola, Director of the Career Resource Center, has been very encouraging and supportive in our mounting this version of accounting.
Q: More than 70 students have pre-registered for the course. What do you think is driving interest in the subject?
A: Almost certainly the interest comes from students’ realization that accounting would be a valuable addition to their resume. And likely they think that the material will be useful not only in careers but in understanding topics in personal finance and in issues reported in the news. And they might expect that accounting is inherently interesting. There might be some parental pressure, also. It likely is not the reputation of the professor: I have been retired and thus off the teaching roster for five years.
Q: How will the way you conduct the course differ from that of a professor at a business school?
A: I will attempt to teach accounting in the liberal arts tradition. I aim to assist students in becoming thoughtful, concerned, informed, responsible, and useful citizens, some of whom will become business executives. I am not trying to turn them into accountants on their way to becoming CPAs. Thus, I feel some freedom in setting the course coverage. For example, I plan not to use one of the large, encyclopedic accounting textbooks. And I plan to include some topics which rely on some knowledge of accounting: for example, the algebra of house mortgages (and the roles of subprime borrowers, mortgage originators, investment banks, Frannie and Freddy, Congress, and government regulators In the recent financial crisis); how to cook the books (Enron); Ponzi schemes (Madoff); present value calculations (DCF) for business investment; and insider trading (Galleon Group). Students should be aware that accounting can be used not only to reflect a firm’s finances with reasonable accuracy but also to conceal and mislead.
Q: In retirement you have taken an interest in the recent housing crisis in the United States. This was not a focus of your research as a full-time scholar. What aspect of it fascinates you most and what have you learned?
A: I have been fascinated by and have learned several aspects of finance from the recent housing crisis. Algebra can be a very useful tool in understanding the crisis. My daughter, who teaches secondary school math, and I recently published an article with that goal in mind. Many people, including many economists, did not foresee the coming crisis in the first half of the last decade. Some people (hedge fund investors John Paulson and Michael Burry, among others) did predict the bust and made lots of money. Government regulators and Congress were asleep or uninformed or in an ideological straightjacket. Some Nobel Prize winning economists did not understand that their mathematical models were the wrong ones. I have come to realize that repair of the system is politically not an easy task. There are too many vested interests, well paid lobbyists, and Congressmen wanting to be reelected.
Q: You retired from the active faculty in 2006, after teaching at Wesleyan for more than 40 years. What are the perks of emeritus status?
A: The perks include more leisure time to pursue new interests, particularly the financial crisis of the past four years, and to learn a bit about how macroeconomics has not served us well. I do not miss grading papers and exams or committee meetings. There are aspects of being in a classroom which I miss; hence I am looking forward to meeting those students in the fall.